The Propriety Of Sections 4 And 5 Of The Arbitration And Conciliation Act And The Effect Of An Arbitral Award Obtained During Pendency Of An Order For Stay Of Proceedings Pending Arbitration

by  Abiodun V. Ogunnubi

Introduction

Whilst some parties to disputes would prefer an alternative dispute resolution mechanism to traditional courtroom litigation, the resolutions reached via the alternative mechanisms are largely enforced through the court system. Various legislative and procedural instruments have been enacted over the years to ensure or facilitate the seamless enforcement of settlement agreements.

In Nigeria, the law and practice of domestic and commercial Arbitration have been governed by the Arbitration and Conciliation Act¹ (ACA) since 1988 when it was first enacted as the Arbitration and Conciliation Decree. Since then, other enactments governing the practice of arbitration have been enacted, such as the Lagos State Arbitration Law, 2009.² Legislations governing arbitration, inclusive of the ACA donates powers to the Courts to revoke arbitration agreements,³ issue interim measures,⁴ including the order for stay of proceedings,⁵ set aside the arbitral awards,⁶ recognize and enforce arbitral awards,⁷ etc.

Based on the foregoing, it is not contestable that the court plays an integral part in the practice of arbitration in Nigeria, both in aiding the arbitral process and by the enforcement of the award through legal machinery.⁸ However, this article seeks to examine the narrow issue of whether a court would become functus officio upon the grant of an order for stay of proceedings or if the powers of the court would be in abeyance and could be resuscitated if an issue that requires judicial determination arises during or after arbitration?

The Propriety of Sections 4 and 5 of the ACA

It is sacrosanct that the agreements of parties are to be observed and honoured, save in limited instances.⁹ Hence, courts are duty-bound to respect and give effect to the provisions of an agreement that incorporates an arbitration clause. The above principle enjoys statutory codification in Sections 4 and 5 of the ACA.10 Nonetheless, an agreement to submit a dispute to arbitration does not oust the jurisdiction of the Court as either party to an arbitration agreement may before a submission to arbitration or an award is made, commence legal proceedings in respect of any claim or cause of action included in the submission.11 Therefore, a party to an agreement containing an arbitration clause in consonance with Sections 4 and 5 of the ACA can file a suit in court in respect of a dispute or claim arising out of the agreement, before the commencement or during the arbitration.

Section 4 of the ACA provides that a court before which an action which is the subject of an arbitration agreement is brought shall, if any party so request not later than when submitting the first statement on the substance of the dispute, order a stay of proceedings and refer the parties to the arbitration. Section 5 of the ACA is similar to the provisions of Section 4 on stay of proceedings pending arbitration except to the effect that the power of the court is discretionary and identifies grounds that the court may consider before either granting or refusing an application for a stay of proceedings.¹² A combined reading of Sections 4 and 5 leads to the irresistible conclusion that a court would grant an order of stay of proceedings in the following circumstances:

1. An application for a stay of proceedings is filed after the appearance and before delivering any pleadings or taking any other steps in the proceedings,¹³
2. The applicant was at the time when the action was commenced and still remains ready and willing to do all things necessary for the proper conduct of the arbitration. The Applicant has not shown an intention to renounce or abandon the agreement before or after the action is filed.

The fact that the power of the court to grant or refuse an order of stay of proceedings pending arbitration is discretionary has been laid to rest in a long line of judicial authorities.14 Thus, a merger of Sections 4 and 5 of the ACA reflecting that the grant or refusal of an application for a stay of proceedings pending arbitration is discretionary and not mandatory would not be remiss.

Arbitral Awards are Final and Binding

Usually, the delivery of an arbitral award stating the decision of the arbitral tribunal signifies the conclusion of the arbitration and constitutes the final judgment on all matters referred to arbitration.¹⁵ While an arbitral award is final and binding, and extinguishes any right of action in respect of the dispute between parties, it gives rise to a new cause of action based on the agreement between the parties to perform the award.¹⁶ Thus, unless an award is challenged by any of the parties, it remains a final and binding determination of the matters between the parties.

As mentioned above, the enforcement or challenge of awards is executed through the court system. Sections 29(1)(b) and 31(1) of the ACA require an Applicant seeking to enforce or set aside an award to file an application to the court, however, the nature of the application to be filed before the court is dictated by the Rules of each court.¹⁷

Effect of Arbitral Award Obtained During the Pendency of an Order for Stay of Proceedings Pending Arbitration

Whilst Section 13 of the ACA empowers parties to approach the court for some interim measure of protection in respect of the subject matter of the dispute during the pendency of arbitral proceedings, the ACA is silent on whether parties can approach the same court that grants an order for stay of proceedings for such interim measures or if such application is to be made to a different court. This also extends to the question of whether parties can approach the same court that ordered arbitration for orders setting aside an arbitral award or recognizing and enforcing arbitral awards as provided by Sections 29 – 32 of the ACA. In this circumstance, would it be regarded as an application in a pending suit or an originating process?

It can be argued that the court that ordered arbitration no longer has jurisdiction to hear and determine an application to either set aside or recognize and enforce an award on account of the award having extinguished all rights of action in respect of the dispute between parties. However, the exercise of the power to stay proceedings does not in any way affect the validity of the exercise of the power to refuse an application to set aside an arbitral award or to grant leave for its enforcement.¹⁸ The Court that ordered arbitration can therefore also entertain an application for the purposes of enforcing or setting aside an arbitral award.¹⁹

Regarding whether an application to set aside or for leave to enforce an award before the court that ordered arbitration would be an application in a pending suit or an originating process, consideration will be given to the case of Shell Trustees v. Imani & Sons Ltd.²⁰ In the Shell case, the Respondent filed an application for leave to enforce an award in the same Court that ordered arbitration but with a different suit number. The Appellant objected on the ground that being an originating process, it was neither served personally nor were the provisions of the Sheriff and Civil Process Act complied with. The Court of Appeal disagreed thus,

The Application truly bore two numbers viz Suit FCT/HC/CV/173/97; Application No. FCT/HC/CV/221/98. It is however common knowledge that the second number merely relates to the identity of the application in connection with a preceding suit bearing the first number. In that event, I must hold that the process filed on the 6th April, 1998 by which the Respondent sought that the arbitral award be recognized and enforced is not an originating process under Section 31 of the Arbitration and Conciliation Act, Cap 19 that would require personal service under Order 12 Rule 2 of the High Court of Federal Capital Territory, Abuja (Civil Procedure) Rules. It is merely an application in a pending proceeding, which may be served on the Respondent through his legal practitioner who had previously undertaken in writing to accept service of process.

Conclusion

It is a well-known fact that rules of court are to be obeyed, but equally trite that rules are made for the courts and courts are not to be shackled by the rules of procedure.²¹ Consequently, an application filed to set aside or enforce an Award in a suit relative to it before the same Court, would be a pending application in an existing suit and not an originating process because it is an extension/continuation of the preceding suit in the same Court.²²

* Abiodun Ogunnubi, Associate, Dispute Resolution Department, SPA Ajibade & Co., Lagos, Nigeria.

Footnotes

1. Cap A18, LFN 2004.

2. Cap A11, Laws of Lagos State, 2015.

3. Section 2 of the Arbitration and Conciliation Decree 1988.

4. Section 13.

5. Sections 4 and 5.

6. Sections 29 and 30.

7. Sections 31 and 32.

8. C.A. Candide Johnson, SAN and Olasupo Shasore, SAN, Commercial Arbitration Law and International Practice in Nigeria, LexisNexis Butterworths, South Africa, at p. 119.

9. See, AG Rivers State v. AG Akwa Ibom State & Anor (2011) LPELR-633(SC).

10. Section 6 of the Lagos State Arbitration Law, 2009.

11. See, Obembe v. Wemabod Estates Ltd (1977) 11 NSCC 264, (1977) 5 SC 115.

12. See, United World Ltd. Inc. v Mobile Telecommunications Services Ltd. (1998) 10 NWLR (Pt 568) 106, (1998) LPELR-13291(CA).

13. See, Obembe v. Wemabod Estates Ltd (supra).

14. See United World Ltd. Inc. v Mobile Telecommunications Services Ltd. (supra).

15. See Ras Palgazi Construction Co. Ltd v. FCDA (2001) LPELR-2941(SC).

16. See Optimum Construction & Property (Dev) Ltd v. Ake Shareholdings Ltd (2021) LPELR-56229(SC).

17. Order 43 Rule 1 of the High Court of Lagos State (Civil Procedure) Rules, 2019 requires all applications to be made to a Judge to be made by motion putting the other party on notice.

18. See, Kano State Urban Development Board v. Fanz Const. Co. Ltd. (1990) 4 NWLR (Pt.142) 1 SC.

19. See, Stabilini Visinoni Ltd v. Mallinson & Partners Ltd (2014) LPELR-23090(CA) (pp. 46 – 57 paras E – D).

20. (2000) 6 NWLR (Pt. 662) 139 at 660.

21. See, Akande v. Jegede & Ors (2022) LPELR-58911(SC).

22. See, Shell Trustees v. Imani & Sons Ltd. (supra) and K.S.U.D.B. v. Fanz Const. Co. Ltd. (supra).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Source: Mondaq